Surfing As A Business Model

One of my favorite places in the world is Acadia National Park located on Mount Desert Island, Maine located near the town of Bar Harbor. I love it not only because of its beauty–a rugged, pink granite shoreline and mountaintops with expansive ocean views of off-shore islands–but also because of the way the Park was created and thrives today. To me it is an excellent example of surfing as a business model.

Acadia, which was created in 1919, has the distinction of being the only US National Park created through private donations. The people who donated the land, in many cases, were successful capitalists (John D. Rockefeller Jr.) and leaders in society (Charles W. Eliot – president emeritus of Harvard University). In fact, Rockefeller ultimately donated something like 45 miles of carriage trails, with 17 breathtaking, work-of-art granite and cobblestone bridges to the Park. These generous individuals did this because they loved the land and its beauty, and because they were concerned for future generations. However, it was more than just a budding environmental movement that motivated these individuals, the original inspiration for the Park included concerns for long-term material prosperity (from Charles Eliot, landscape architect and son of Charles W. Eliot):

“It is time decisive action was taken, and if the state of Maine should…encourage the formation of associations for the purpose of preserving chosen parts of her coast scenery, she would not only do herself honor, but would secure for the future an important element in her material prosperity.”

What is particularly interesting to me has been the secondary effects of these gifts to the local community, and the analogous way in which prosperity visits many open source communities. While the original donors may have not gained as much as maybe they could have if they had privately developed the land, if you visit MDI today you cannot miss the prosperity of the region as compared to many other areas along the Maine coast. Examples include: 120 cruise ships, including the 1132′ Queen Mary 2, visited Bar Harbor this season; beautiful hotels, motels, and B&Bs abound; charming towns such as Bar Harbor, Southwest Harbor, and Northeast Harbor are thriving (the summer yachts are amazing); many bike and kayak rental shops are doing great business; hiking guides, books and gear are widely sold; great restaurants are scattered all over the island; and even a world-class biomedical research lab (The Jackson Lab) is located there. In total, the original gift has spawned significant economic activity that continues to grow and give back to the community, benefiting many more individuals than the few initial wealthy land owners.

In the open-source world, part of the broader peer production movement, analogous situations occur. As we all know communities collaborate to create some form of “gift”, which in our case is a useful piece of software. These systems are created for a variety of reasons including commercial (make money, develop a reputation), altruistic (benefit society, foster open science, help fellow developers), practical (scalable software process, ease of collaboration) and fun (community engagement, personal growth). While it’s likely that participating individuals and organizations will not reap the same benefit that an IP-based corporation might, the potential secondary effects offer bountiful opportunities. Yochai Benkler, Berkman Professor of Entrepreneurial Legal Studies at Harvard, refers to this concept in his recent TED presentation on new open-source economics. Near the 16 minute mark he refers to “surfers”, individuals and organizations that take advantage of the secondary effects of peer production, and cites IBM’s service model and Google as two preeminent examples of surfer companies. Other individuals describe it similarly. For example, Dr. Ron Kikinis, Director of the Surgical Planning Laboratory at Harvard Medical School, and inspired visionary behind the medical imaging application Slicer, refers to open source tools as building an international highway system, over which private, commercial, educational, research and government interests collaborate to make our lives better (see this presentation).

Kitware like many open source companies has learned from these and other examples. We are a for-profit company, growing at a sustained 25-30% rate, profitable every year from founding, and we are masters of open source surfing. Our business model includes creating, coordinating, and ultimately giving open source systems worth hundreds of millions of dollars (see ohloh.net cost estimates at the bottom of the NAMIC Kit page). However, being capitalists we understand that complex software systems like this require services, and we recognize that over 2/3 of software revenues are service-based and measured in hundreds of billions of dollars — see Yochai Benkler Coase’s Penguin. With this gigantic opportunity available to us, we (and many other open source firms) have developed an enlightened business model that integrates generosity, research, education, and the practice of open science, with service opportunities including collaborative R&D, consulting, commercial solutions, support products and training.

So the next time someone asks you about open source business model, think of surfing: We make big waves by dropping open source software systems into the ocean of scientific computing, and then ride the resulting waves of opportunity. Like the generous individuals and organizations that came before us, we too hope to leave a lasting legacy upon which we and others will thrive.